Micron Technology, Inc. (NASDAQ: MU)'s announcement on Tuesday that it will launch a $1 billion offering of common stock shouldn't necessarily be seen as a negative, analysts at Credit Suisse commented in a research report. The firm's John Pitzer maintains an Outperform rating on Micron's stock with an unchanged $50 price target (see Pitzer's track record here).

Granted, some investors may have a valid reason to question management's confidence in the sustainability of its business in reaction to the offering, the analyst stated. But the opposite of the argument can be made that the stock offering accomplishes three key objectives.

A Positive Take, Or 3

First, Micron's stock offering allows for an acceleration in its debt reduction through a cost-effective manner, Pitzer stated. Specifically, indentures in its 2023 senior notes makes the retirement $30 million cheaper through an equity offering as opposed to using its free cash flow.

Second, the company holds $2.7 billion of onshore cash, and 80 percent of its total debt is also onshore. However, 90 percent of the total cash generation is done overseas, so the stock offering will give management much better flexibility to manage its onshore cash.

Third, and perhaps most important, Micron's management team said the stock offering is able to accomplish the two objectives above with minimal to no dilution. In fact, the analyst's math suggests a worse case scenario of just a 1 percent dilution to his fiscal 2018 earnings per share estimate of $8.00.

Bottom line, if Micron's management team was really worried about its free cash flow generation outlook then the size of the offering would be "significantly larger."

"Irrespective of today's news, we continue to argue "stronger-for-longer" as supply metrics remain mostly behaved, capacity costs are structurally increasing, and new demand drivers in DRAM and NAND are at least maintaining historic bit growth," the analyst concluded.